Best of the Week
Most Popular
1.Trump Delirium Triggers Stock Market Brexit Upwards Crash Towards Dow 20,000! - Nadeem_Walayat
2.The Future Price Of Gold Will Drop Below $1000 In 2017 -InvestingHaven
3.May Never Get Another Opportunity to Buy Gold at this Level Again - Chris_Vermeulen
4.Delirium - The Real Reason Why Donald Trump Won the US Presidential Election - Nadeem_Walayat
5.Why Nate Silver / Fivethirtyeight is one of the Most Reliable Election Forecasting Indicator? - Nadeem_Walayat
6.Gold Price Forecast: Nasty Naughty November Gold Price Trend - I_M_Vronsky
7.Gold Mining Stocks Screaming Buy! Q3’16 Fundamentals - Zeal_LLC
8.Delirium of Trump Mania Win's Mr BrExit US Presidential Election 2016 - Nadeem_Walayat
9.The War On Cash Goes Nuclear In India, Australia and Across The World - Jeff_Berwick
10.Hidden Signs for Gold and Silver - P_Radomski_CFA
Last 7 days
If Trump Doesn’t Do This, We Will Have the Great Depression 2.0 - 5th Dec 16
India’s Demonetization Could Be the First Cash Domino to Fall - 5th Dec 16
Our Future Economy, Jobs, Banking, And Governance - 5th Dec 16
Gold and Silver Bullion Buying Opportunity for 2017? - 4th Dec 16
First UK BrExit then Trump, Next BrExit Tsunami Wave to Hit Italy HARD Sunday! - 3rd Dec 16
The 10YR Yield and SPX Stocks Bull Markets - 3rd Dec 16
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16
How Moving Averages Can Identify a Trade - 1st Dec 16
Silver Prices and Interest Rates - 1st Dec 16
America, is it Finally time for us to say Goodbye? - 1st Dec 16
Blockchain Technology – What Is It and How Will It Change Your Life? - 1st Dec 16
Burn the Flags, Can Trump Salvage The Sinking US Economic Ship? - 1st Dec 16
Will US Housing Real Estate Market Tank in 2017? - 1st Dec 16
Referendum Puts Italy's Government to the Test - 30th Nov 16
Why We Haven’t Seen Gold Price Rally after Trump Victory - 30th Nov 16
Breakdown and Slide in Crude Oil Price - 30th Nov 16
A 'Wicked Rally' in Gold Price Predicted - 30th Nov 16
Silver Market Sentiment Looks Golden - 30th Nov 16
Indian Demonetization Denotes Severe Stress in the Global Gold Market - 30th Nov 16
Owning Gold and Silver in Troubling Times - 29th Nov 16
Trump's Presidency - Stock Market Crash or Start of New Mega-Trends - 29th Nov 16
Prime Minister Modi's War Against Corruption, Black Money and Fake Currency Notes in India - 29th Nov 16
Can President Trump Really Drain the Swamp? - 29th Nov 16
President Trump’s Economic Plan Isn’t Going to Work - 29th Nov 16
The US Bond Bear Market Has Begun! - 29th Nov 16
Simple Yet Powerful Technical Trading Tools - 28th Nov 16
Public Infrastructure – Welcome to the World of Waste, Fraud, and Abuse - 28th Nov 16
Fifty Years Later, Moore's Computing Law Holds - 28th Nov 16
An Elusive Stock Market Top - 28th Nov 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

Gold, Stocks Sell Signal

Commodities / Gold and Silver 2013 Dec 19, 2012 - 10:47 AM GMT

By: Brian_Bloom

Commodities

The sell signal is not yet definitively bearish because even at $1560, gold will be “trading” within the confines of a well established range. Nevertheless, the target measured move of $1109 on  the 3% X 3 box reversal P&F chart looks less ridiculous than it did a few weeks ago. 


As an aside, I have been bemused by how “easily” some commentators have been able talk about a single element of the financial market – the Fed – having the implicit ability to “control” the US economy.  Clearly (to me at least) if the Fed embarks on QE to Infinity, the implicit assumption of these commentators is that “The Market” will just watch breathlessly whilst sitting on its hands. Clearly (to me at least) The Market will not just sit and watch. As the risks of inflation rise, so the risks of borrower defaults in the Private Sector Capital Markets will also rise, and Private Sector interest rates will inevitably rise to offset those  risks. With its $40 billion (or so) mortgage purchases per month, The Fed may or may not eventually “control” 100% of the mortgage market through Fanny Mae and Freddy Mac. But even if 100% of all domestic mortgages are 30 year loans at low fixed rates, what about Credit Card rates, Hire Purchase Finance rates, Overdraft Rates, Consumer loan rates, Other?

In my view, 2013 will be a watershed year because 2013 will be the year  when reality finally bites. This doesn’t necessarily imply economic collapse. Indeed recognition of “reality”  may be a good thing. When people stop kidding themselves and lying to each other, then consensus on significant economy management action is likely to become politically achievable, and the following seems at least possible, if not  likely:

1.       Eligibility for US government funded pensions will become subject to asset/income testing

2.       Retirement age will be pushed out by between 2 and 5 years.

3.       The US will give up on its objective of being “The World’s Policeman”. The last time I looked, US Defence Spending was greater than the Defence Spending of the rest of the world combined.

4.       Medical over-servicing will be significantly curtailed as health care budgets are cut;  which will lead to “personalised medicine” becoming a subject of intense focus.

5.       Because of rising risks in the Private Sector Capital Markets, rental of domestic property will become a more viable proposition from the perspective of property owners – which implies a fall in Real Estate capital values and a rise in rental returns. In turn, this will render it obvious to even an intellectual hunchback that Fanny Mae and Freddy Mac are hopelessly insolvent by any commercially acceptable yardstick. (Explanation: The idea of the Fed funding Fanny Mae and Freddy Mac purely by printing money is nothing short of a cockamamie, hair-brain scheme when it is seen in context of the Capital Markets as a whole. The Fed cannot possibly aspire to control the entire world’s capital markets. Such an aspiration is pure lunacy. For one thing, the US Dollar does not exist in a vacuum.)

6.       “Rorting the system” will become ever more difficult as reality bites. For example, Government incentives for building emerging, innovative businesses will be linked to employment opportunities created and will be forfeited/refundable if those opportunities are not created.

7.       Voters will eventually come to understand that salaries of executives of large organisations should not automatically be higher than salaries of executives of high growth businesses because it requires far less “talent”  to manage a large organisation with an already existing momentum in the market place. Some form of controls will need to be introduced whereby the CEO of any corporation cannot earn more than a Board nominated (of course, generous) multiple of that corporations’ average executive earnings, benchmarked against similar standards for similar organisations at similar points in their life-cycles. It will follow that if a CEO wants to earn super income then he will have to accept part of his salary in shares (taxable as income) and work to raise the value of those shares against a (say) rolling 10 year median benchmark P/E ratio of the market as a whole.  It does not take a rocket scientist to raise prices (and profit margins) in an oligopolistic competitive environment. Such behaviour is socially counterproductive and should be punished – not rewarded. This is not a “socialist” view - it is quite consistent with the concept that adding value should be appropriately rewarded. Arguably, raising prices (and margins) does not add value to anyone other than the price gouger. Arguably, such behaviour serves to undermine economic momentum.

With the above in mind, count this analyst  as one of those commentators who does not think that the Equity Markets will be higher in December 2013 than they are in December 2012.

Brian Bloom

Author, Beyond Neanderthal and The Last Finesse

www.beyondneanderthal.com

Beyond Neanderthal and The Last Finesse are now available to purchase in e-book format, at under US$10 a copy, via almost 60 web based book retailers across the globe. In addition to Kindle, the entertaining, easy-to-read fact based adventure novels may also be downloaded on Kindle for PC, iPhone, iPod Touch, Blackberry, Nook, iPad and Adobe Digital Editions. Together, these two books offer a holistic right brain/left brain view of the current human condition, and of possibilities for a more positive future for humanity.

Copyright © 2012 Brian Bloom - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife